White House readies for ethanol announcement, sources say

A refinery operated by Valero in the Manchester neighborhood of Houston.

A refinery operated by Valero in the Manchester neighborhood of Houston.

Photo: Pat Sullivan, STF / Associated Press

Photo: Pat Sullivan, STF / Associated Press

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A refinery operated by Valero in the Manchester neighborhood of Houston.

A refinery operated by Valero in the Manchester neighborhood of Houston.

Photo: Pat Sullivan, STF / Associated Press

White House readies for ethanol announcement, sources say

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WASHINGTON - Oil refineries from the Gulf Coast and across the country could be in for a windfall under reforms to the federal ethanol mandate expected to be announced by the White House as early as Tuesday.

After months of internal debate and negotiations with oil and corn state politicians like Sen. Ted, Cruz, R-Texas, and Sen. Chuck Grassley, R-Iowa, administration officials are preparing to move ahead, sources close to the talks said.

The White House has been looking at an overhaul that would count the ethanol shipped overseas towards federal quotas, which is expected to lower the price of the biofuels credits that refineries purchase in lieu of blending ethanol. At the same time the White House has discussed waiving environmental restrictions that prevent the sale of E15, a fuel with a higher concentration of ethanol, during the summer, in a concession to ethanol producers.

Many refineries, including San Antonio-based Valero and Sugar Land-based CVR Energy, have been rooting for such an outcome.

"For too long, the [ethanol mandate] has forced merchant refiners to purchase compliance credits known as RINs at exorbitant costs from a volatile and opaque market prone to fraud and speculation," Fueling American Jobs Coalition, a lobbying group representing refineries and gasoline retailers, said after a meeting at the White House last month. "Allowing RINs associated with exported biofuel to be used for compliance would go a long way toward addressing the burden of persistently high RIN costs on merchant refiners."

On Wall Street anticipation of government intervention is already driven down the price of RINs, which were trading for 18 cents a credit Tuesday morning, an 80 percent decline from when Trump came into office in 2016, according to Bloomberg News.

Adding to the uncertainty, the Environmental Protection Agency has issued a flood of so-called hardship waivers to smaller refineries, who claim the costs of the ethanol mandate are too high. That in turn has drawn lawsuits from ethanol producers, who argue the waivers are driving down demand for their fuel.

The White House's hopes of a grand bargain - what Trump describes as a "win-win" solution - has so far fallen flat.

The Renewable Fuels Association, the chief lobbying arm of the ethanol industry, is opposing the move to count exports towards ethanol quotas, which they argue will drive down demand for their product.

"We think the restrictions on E15 should be lifted, but the benefit will be negated by the export RINs," said Rachel Gantz, spokesman for the RFA. "We don't think its a win, win."

The proposed overhaul drew criticism from Midwestern senators, who had spent months trying to talk Trump out of taking action that would lower the price of biofuel credits. At a forum in Washington Tuesday, Sen. Joni Ernst, R-Iowa, attacked EPA Administrator Scott Pruitt for lying to her when he promised to protect the ethanol mandate, as well as "the way he spends money, the way he misuses his office," according to Politico.

Pruitt "is about as swampy as you get here in Washington, D.C. And if the president wants to drain the swamp, he needs to take a look at his own cabinet," Ernst said